Bombay High Court
Asmi Jewellery India Limited vs Godrej Consumer Products Limited on 11 August, 2015
Bench: K.R. Sriram
1 SJ35.13.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
SUMMONS FOR JUDGMENT NO.35 OF 2013
IN
SUMMARY SUIT NO.131 OF 2013
Asmi Jewellery India Ltd. ).. Plaintiffs
Vs.
Godrej Consumer Products Ltd. ).. Defendant
----
Mr.Piyush Raheja, Sunil Ganjan a/w Jayesh Mestry i/by RMG Law
Associates for the plaintiffs.
Mr.Darius Khambata, Senior Advocate a/w Shreya Ramesh i/by Bharucha &
Partners for the defendant.
WITH
SUMMONS FOR JUDGMENT NO.45 OF 2013
IN
SUMMARY SUIT NO.359 OF 2013
Laxmi Dia Jewel Pvt. Ltd. )..Plaintiffs
Vs
Godrej Consumer Products Ltd. ).. Defendant
----
Mr.U.P.Bobde i/by P.P.Kulkarni for the plaintiffs.
Mr.Darius Khambata, Senior Advocate a/w Shreya Ramesh i/by Bharucha &
Partners for the defendant.
----
CORAM : K.R.SHRIRAM, J.
DATE : 11.08.2015
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P.C.
For reasons to be recorded separately, both the summons for
judgments are rejected. Un-conditional leave to the defendant granted.
Defendant to file their written statement within 4 weeks. Within 2 weeks
thereafter parties to file their respective affidavit of documents and also
complete discovery and inspection.
Stand over to 30.9.2015 for issues.
ig REASONS
1 The claims in both the suits are similar. The defences in both the suits
are similar. The defendant is also common though the plaintiffs are
different. Therefore, it would be convenient to dispose of both the summons
for judgments by this common order.
2 Both the plaintiffs claim to have sold, supplied and delivered to the
defendant various items made in Gold. According to the plaintiffs the
defendant had placed the purchase orders, based on which the goods were
supplied and corresponding invoices raised and the defendant, based on
sham defence is refusing to make payment and therefore, the plaintiffs are
entitled to a summary decree.
3 The case of the plaintiffs in Summary Suit No.131 of 2013 is that
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since 2004-2005 one of the sister company of the plaintiffs was selling
goods to the defendant which included Gold coins and various jewellery
products. For the said business, the officers and employees of the said sister
company interacted and coordinated, at the relevant time, with one Mr.Amit
Gaine who was introduced as Deputy General Manager of the defendant-
company. Between July-2004 and December-2006 they claim to have had
interactions by e-mail and telephone with Amit Gaine who placed orders
upon the said sister company. The sister company supplied as requisitioned
and were also paid.
4 The plaintiffs therefore, started doing business with the defendant
through Amit Gaine. It is submitted that one Mr. Anuj Awasthi of the
defendant informed the plaintiffs that Mr.Amit Gaine along with one
Mr.K.D.Dotiwalla and one Mr.K.V.Kumar will be dealing with the plaintiffs
and were authorized by the defendant to place orders upon the plaintiffs and
as Amit Gaine interacted with the plaintiffs for placing several orders
thereby indicating that he had the defendant's authority to place such orders
and the defendant not having communicated to the plaintiffs that the said
Mr.Amit Gaine did not have the authority to place such orders, Mr.Amit
Gaine is assumed to have the apparent authority or atleast ostensible
authority. It is the case of the defendant that Amit Gaine did not have any
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authority to place any orders on the plaintiffs and that too of such large
quantity of Gold and that Mr. Anuj Awasthi has made no such
representation. In my view, on this ground alone, the defendant is required
to be given un-conditional leave to defend because whether Gaine had any
authority at all is a triable issue.
5 The plaintiffs also stated that the purchase orders were all signed by
Mr.K.V.Dotiwalla and Mr.K.V.Kumar. It is the defendant's case that the
signatures have been forged as the said Mr.Dotiwalla and Mr.K.V.Kumar
have not signed any purchase orders. This is another ground for leave to
defend to be granted. It is also stated that the purchase orders said to have
been placed on the plaintiffs were all bogus and a fraud has been played by
the said Gaine on the plaintiffs and the said Gaine is now in judicial custody
based on a complaint filed by the defendant with the Economic Offences
Wing.
6 But as far as the plaintiffs are concerned, Gaine had ostensible
authority. His action binds the defendant especially since there is no dispute
that the goods were delivered. This is incorrect because the defendant has
disputed that any goods were delivered to the defendant or to their account.
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7 The fact that fraud has been played by Gaine and separate criminal
proceedings have been filed against him are also not disputed. The stand of
the plaintiffs is that Mr.Gaine had authority to commit to the transaction in
question on behalf of the defendant and the defendant cannot now disclaim
its liability on the ground that it was defrauded by Gaine and in any event,
even if there was any such fraud, it was an internal matter between Gaine
and the defendant and the plaintiffs have to be paid by the defendant. On
this point, Mr.Raheja counsel for the plaintiffs relied upon the decision of
the Court of Appeal in 1UxBridge Permanent Benefit Building Society Vs.
Pickard to submit that a principal is liable for the fraud of his agent within
the scope of the latters authority whether or not fraud is committed for the
benefit of the principal or the agent. It is true that the court of appeal has
held so, but it is held so based on the facts and circumstances of the case. It
was the case where a solicitor's managing clerk obtained an advance in the
sum of £ 500 upon a mortgage of property by producing to the society's
solicitors a fictitious deed. It was not proved that the solicitor's clerk
actually forged the deed but it was contended that it was a forged document.
It was also contended that the solicitor could not be made liable for the
fraudulent act of his clerk where a fraud involved forgery. The court held
1 1939 (2) ALL ER 344 (CA)
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that as a fact that the clerk had ostensible authority for all that he did in the
matter, the master was liable despite the fact that the fraud involved forgery.
Therefore, in that case the court came to a conclusion on evidence that the
managing clerk put, in charge of that office, as he was, was unquestionably
given, in fact, full authority to conduct of the business of a solicitor's office
on behalf of, and in the name of his principal. In page-347 of the said
citation it is observed as under :-
"The managing clerk, put in charge of that office, as he was,
was unquestionably given in fact full authority to conduct the
business of a solicitor's office on behalf of, and in the name
of , his principal. That authority would cover, not merely
acting for clients, but also carrying through all transactions
which would normally be carried through by a solicitor-
namely, completion of conveyancing business with third
parties,dealings with clients, and the obtaining from such
third parties, upon completion of the transaction, of sums of
money, and the giving of receipts therefor. With regard to
that part of the office activities, there is no question of the
relationship of solicitor and client between the solicitor and
the third party. Nevertheless, the authority of a clerk
occupying the position of the principal to deal with third
parties in circumstances where the third parties are going to
change their position as the result of the transaction in
progress, or which appears to be in progress, cannot be
denied."
8 Therefore, this court before holding the defendant liable, has to come
to a conclusion that the said Gaine was given in fact full authority to place
orders on the plaintiffs and that the said Gaine placed the order in the
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normal course of his employment. The defendant has denied that Gaine had
any authority. The defendant has also denied that they made any
representation to the plaintiffs that the said Gaine had any authority to do
what he did. This undoubtedly, raises a triable issue.
9 Mr. Raheja relied on an e-mail dated 12.6.2008 at Exhibit B-6 to the
plaint. The said e-mail is from Mr.Anuj Awasthi of the defendant.
According to Mr.Raheja this e-mail indicated that Gaine had the authority
from the defendant. I am afraid it cannot be accepted. The e-mail simply
reads as under :-
"Dear Seema,
Please find attached PO. Please confirm if the same is ok,
then I'll send the signed hard copy.
If the PO is ok, then send us the invoice for 75% advance
payment.
Regards
Anuj Awasthi"
10 Mr.Raheja thereafter relied on few other e-mails of Gaine but none of
them indicate anywhere that he had any authority from the defendant.
Moreover, some of the purchase orders are rather curious for e.g., purchase
order at Exhibit E-8 dated 23.1.2010 is for 410 pieces of 50 grams of Gold
coins, i.e., 20.5 k.g. of gold and the delivery is to be made to one Mini Yash
Stores and to be delivered to one Tushar Desai. It is rather strange to
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suggest that the defendant would want 20.5 k.g. of Gold to be delivered to
a shop and that too, to one Tushar Desai who is not the employee of the
defendant. In fact, by reading the purchase order, the plaintiffs should have
been alarmed and should have made inquiries. The ledger copy relied upon
by the plaintiffs at Exh.F is addressed to Amit Gaine and again curiously
ledger is maintained in the name of "Amit Gaine-Godrej Consumer
Products Pvt. Ltd." and it is not ledger account of "Godrej Consumer
Products Pvt. Ltd."
The counsel for the plaintiffs stated that Amit Gaine has been using
official e-mails and official letter-heads of the defendant and therefore, Amit
Gaine is deemed to have authority from the defendant. This suggestion is
unacceptable. Just because an employee has misused the company
documents and used the company e-mail ID for playing a fraud does not
mean that he had authority from the company.
11 Mr.Bobde learned Counsel for the plaintiffs in Summary Suit No.359
of 2013 supported the submissions of Mr. Raheja and submitted that it was
not the first time that the plaintiffs in that suit had dealt with Gaine with
their dealings going back to 2008. In this suit there was only one purchase
order in question that remains unpaid viz. Purchase Order- PO No.SMB/09-
10/086 dated 5.1.2010 for Rs.2,61,50,112/-. The said purchase order is at
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Exhibit-A to the plaint purportedly signed by one K.Y.Kumar, General
Manager, purchase. The defendant in the affidavit in reply has denied that
the said purchase order has been signed by Mr.K.Y. Kumar.
12 At the end of the day the question that comes up is whether Gaine
had the authority or whether Gaine made fraudulent mis-representation and
whether the employer, i.e., the defendant by words or conduct has induced
the plaintiffs to believe that Gaine was acting in the lawful course of the
employers' business. This is a triable issue. The stand of the defendant, like
Mr.Bobde submitted, does not prima facie appears to be an after thought.
This is because the plaintiffs in Summary Suit No.131 of 2013 by a letter
dated 15.2.2010 called upon the defendant to pay Rs.6,33,82,946/- and in
reply by their letter dated 12.3.2010, the defendant denied the liability and
made it clear that Gaine had no authority and a fraud has been played. This
is the stand which the defendant also took before the Economic Offences
Wing and Gaine is in judicial custody. What is necessary to note that
despite the stand of the defendant in March-2010, plaint in Summary Suit
No.131/2013 has been declared only on 28.12.2012 and lodged on 2.1.2013,
almost close to 3 years. In the case of Summary Suit No.359/2013, the
plaintiff filed an FIR against the officers and Directors of defendant on
11.3.2010, whereas the plaint has been declared and lodged only on
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8.1.2013. This court in the matter of 2Bankay Bihari B.Agrawal Vs.
Bhagwanji Meghji & Ors. has held that though indolence on the part of the
plaintiffs is no ground for granting un-conditional leave to defend, but it is
a relevant factor to be considered together with the merits of the defence as
affecting the exercise of judicial discretion to grant un-conditional or
conditional leave to defend or to refuse leave to defend the suit.
Paragraphs-30 & 31 of the said Judgment read as under :-
"30. A Divison Bench of this court had occasion to deal with
a somewhat connected argument in (Steel Engineering Co. &
Ors. v. Jawarharlal Dalamchand), Appeal No.99 of 1972 in
Summary Suit No.43 of 1972 ( per Tulzapurkar & Mukhi, JJ,
dated 19th September, 1972). The argument that was mde was
that the summary suit itself had been filed almost three years
after the claim in the suit had become due and, therefore, the
defendant should be entitled to unconditional leve to defend
the suit on the ground that the expedition that becomes due to
a vigilant claimant under Order 37 cannot be claimed by the
indolent plaintiff. The Division Bench rejected the contention
by observing that the circumstance that a summary suit is
filed almost at the fag end or three years' limitation after the
claim became due is, by itself, no ground for granting
unconditional leave to defend the suit. The Division Bench
thereafter observed :
"It is conceivable that this circumstance, taken along with the
other circumstances in the case, may render an issue raised
by the defendants a triable one, but the circumstances that
there has been delay in filing the suit almost three years after
the claim has become due cannot, in our view, be a ground
for granting unconditional leave to defend. It is also not
possible to subscribe to the view that the summary procedure
under Order XXXVII cannot be claimed by a plaintiff who has
filed his suit at a belated stage, for it is quite conceivable that
2 2001(2) Bom.C.R. 86
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such refrain on the part of the plaintiff might be due to the
fact that he might desire to save costs of the litigation and
might try to avoid visit (of) such costs on the defendant and
there might be several other reasons which could legitimately
refrain the plaintiff from not taking legal action immediately
after the claim becomes due".
With great respect, we are in total agreement with the view
expressed in this judgment. The thinking is unmistakable :
that indolence on the part of the plaintiff, per se, is no ground
for granting unconditional leave to defend, but is a relevant
factor to be considered together with the merits of the defence
as affecting the exercise of judicial discretion to grant
conditional or unconditional leave to defend or to refuse
leave to defend the suit. In our view, with respect, this
judgment correctly lays down the law and we are in
agreement with it.
31 We are not inclined to accept the contention for the
plaintiffs that in the exercise of the discretion to grant
conditional leave or refuse leave to defend the suit, the
discretion is to be moulded only by the nature of the defence.
In our view, the judgments of the Supreme Court in (Santosh
Kumar v. Bhai Mool Singh), A.I.R 1958 S.C. 321 and in
M/s.Machalec Engineering (supra) do not lay down any such
proposition of exclusion as contended by the defendants."
In my view, the delay in filing the summary suits is also a factor that
has to be kept in mind to grant un-conditional leave in the present suits.
13 The plaintiffs had also filed Company Petitions under Sections 433 &
434 of the Companies Act 1956 against the defendant being Company
Petition No.389 of 2011 and Company Petition No.306 of 2010. Both the
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company petitions came to be dismissed by this Court by a judgment
pronounced on 5.5.2014. All the documents relied upon in these suits were
relied upon in the company petitions and submissions identical to the
submissions made before this court, were made by the plaintiffs in the
company petitions and the defendant also took the same defence that the
defendant took in this court. The company court analyzed all the
submissions and the documents and came to the conclusion that the matters
cannot be determined in summary jurisdiction and requires taking evidence.
Paragraph-16 of the said judgment reads as under :-
"I am unable to accept Mr.Joshi's submission that so long as
Gaine had the `ostensible' authority to accept delivery, that is
sufficient. These are, as I have noted, matters that cannot be
determined in a summary jurisdiction. They demand the
taking of evidence. At each stage, the non-conforming nature
of the transactions in questions will need to be examined. I
do not believe it is at all possible to conclude that there is an
ascertained and undisputed debt, or that GCPL has no
substantial or bona-fide defence. Certainly its defence cannot
be said to be spurious, speculative or specious."
14 In fact the plaintiffs have conveniently not disclosed all the
documents that were relied upon by the defendant in their affidavit in reply
in the company petition, in this plaint. It is also settled law that while
deciding a petition under Sections 433 & 434 of the Companies Act, the
principles applicable to the granting of leave to defend the summary suit
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filed under order 37 of the CPC are required to be considered and the
company court draws upon the analogy of a summary suit under order 37 of
the CPC. The company court if it reaches the conclusion that, had it been
exercising ordinary original civil jurisdiction, it would have granted un-
conditional leave to defend, it must dismiss the winding up petition. This
proposition can be found in 3S.M.patel Iron Traders Private Limited Vs.
Sugam Construction Private Ltd. , in 4N.Radhakrishnan (Major) (Retd.) Vs.
ACME décor India Pvt. Limited, in ig Sanjay Khanna Vs. Discovery
Communications India and unreported judgment of Bombay High Court in
Khyati Realtors Pvt. Ltd. Vs. M/s. Zenal Construction Pvt. Ltd. and in
Videocon Industries Limited Vs. Intesa Sanpaolo S.P.A.
15 Therefore, the converse would also apply, i.e., while deciding an
application for leave to defend in summary suit, the principles and
considerations considered while deciding a company petition can be drawn.
In the company petition filed by the plaintiffs, the company court has
concluded that the correspondence relied upon by the plaintiffs is not
sufficient to conclude that Gaine had ostensible authority to accept delivery
and that these are matters that cannot be determined in summary
3 (2011) 162 Comp Cas 298
4 2003(68) DRJ 340
5 (2002) SCC OnLine Del 1230
6 COMPANY PETITION NO.243 OF 2012 DECIDED ON 29.8.2013
7 APPEAL (L) NO.29/2014 IN COMPANY PETITION NO.528/2012 DECIDED ON 18/19 JULY 2014
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jurisdiction. The company court has also concluded that evidence will have
to be recorded and that the defence of the defendant is substantial and
bonafide. The court has also concluded that the defence cannot be said to be
spurious, speculative or specious. In the circumstances, in my view, un-
conditional leave has to be granted.
(K.R. SHRIRAM, J.)
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